Business Insights: Automotive Industry

Showing posts with label Automotive Industry. Show all posts

Sunday, April 20, 2008

Profile of Tata Companies - An analysis

Excerpts sourced from Economic Times and TNN

TATA MOTORS

Competencies & Opportunities: Tata Motors has some new offerings on the block. This includes the 200-500 horse power ‘World Truck’ for the global market. It has also taken a huge stride to grow inorganically by acquiring the business of Ford under the brands, Jaguar and Land Rover. New models such as Sumo Grande and the Rs 1-lakh Nano car are likely to give a fillip to the domestic business.

Challenges: Higher interest rate may dampen the demand for cars. Rising cost of key raw materials such as steel and aluminium will put pressure on margins. Turning around of the Jaguar Land Rover business into a higher profitable business is a major challenge. Positioning of the Tata brand over such a wide variety of vehicles segments starting from the cheapest Tata Nano to the luxury brands like Jaguar will not be easy.

TATA STEEL

Competencies & Opportunities: The Corus acquisition will give Tata Steel the access to global markets and higher volumes. The strong outlook for global as well as domestic steel sector will improve sales realisation. Acquisition of iron ore and coking coal mines in different parts of the globe will improve the operating margin of Corus and contribute more towards the bottomline of the combined entity. The new greenfield and brownfield projects in Orissa, Jharkhand and Chhatisgarh will add significantly to the topline.

Challenges: The higher inflation and pressure from the domestic government might force steel producers to reduce domestic steel prices, resulting in lower profit margins. The higher synergy from Corus will come through only if Tata Steel manages to integrate it successfully.

TCS

Competencies & Opportunities: TCS has been focussing on contracts with larger deal size and time span. This helps in increasing client engagement. Broadening of deliverables will also help in improving competence in the global market for IT services. TCS has opened delivery centres in low-cost destinations of Asia and Latin America. Such a multi-shore delivery strategy comes in handy in times of economic slowdown and lower IT spends by the clients. Presence in the domestic market is worthwhile in the scenario of a stronger home economy and depreciating dollar.

Challenges: Exposure to dollar denominated income increases risk of margin erosion given appreciating rupee. Slowdown in the US may impact the IT budgets of the US clients. This may retard the topline growth. Competition from MNCs in India will intensify. TCS has to come up with firm strategies for its domestic business.

TATA POWER

Competencies & Opportunities: Tata Power is India’s largest private sector power utility with installed capacity in excess of 2,300 mw. Over 600 mw new capacity is likely to be added during FY09, with another 8,000 mw capacity to be added over the next five years including a 4,000-mw UMPP at Mundra. TPL has acquired a 30% stake in two major Indonesian coal producers to assure future fuel requirements. It is emerging as an integrated player in India's power sector with investments in power generation, transmission, distribution and fuel supplies (coal mining and transport).

Challenges: Meeting the time and cost deadlines while executing the long gestation projects is a big challenge as the costs of equipment and project implementation services have gone up substantially. Even after the successful completion of its projects, TPL has to manage the regulatory environment well to ensure sufficient return on its investments.

INDIAN HOTELS

Competencies & Opportunities: Indian Hotels runs the largest domestic hotel chain with 71 hotels and an inventory of 10,487 rooms. It enjoys presence across wide range of hotels right from deluxe properties to budget. This puts the company in a bright spot and helps it take advantage of the growing tourism industry in India. Besides, the company has 14 properties overseas and is expanding its global footprint via acquisitions and greenfield ventures. This is likely to result in greater brand recognition abroad. Its recent entry into lucrative segment of business jets will help the company to take advantage of growing opportunities in this space.

Challenges: Its revenue is greatly dependent on India, where average room rates are expected to see a decline beyond FY09 when supply starts coming in. Rising real estate costs have greatly reduced the return on capital on new properties in major cities.

TATA TEA

Competencies & Opportunities: The company has taken initiatives to introduce different variants of tea. It has also forayed into bottled water and other beverages. This is likely to help it transform itself from a tea company to a beverages company. Acquisitions, geographic expansion and new products are the way to go for Tata Tea, which is already the second largest integrated tea company in the world. Its retail foray through ‘Chai Unchai’ beverage stores is likely to open a new route of growth for the company.

Challenges: Tata Tea operates in a labour-intensive tea industry, which has long gestation periods. This can be an imepdiment in improving operational efficiency. The company will have to grapple with the increase in raw material prices. The appreciation in the rupee is likely to drag profitability of the international businesses.

TATA COMMUNICATIONS

Competencies & Opportunities: Utilisation of existing infrastructure to deliver valueadded services is a sound proposition for Tata Communications. The company recently tied up with Telsima to provide WiMAX services in the country. It has also launched its global telepresence network service to offer virtual meeting solutions. These initiatives will fuel future revenue growth. Tata Comm’s strategy to build global tie-ups for high-end technologies will help it keep pace with the fast-changing technology scenario and improve its global presence.

Challenges: Tata Comm needs to increase focus on deploying managed services, given the stiff competition in domestic as well as global enterprise data space from bigger telecom operators. The company has to improve operational processes in order to increase customer base for its broadband and other services rapidly.

TATA CHEMICALS

Competencies & Opportunities: The recent acquisition of US-based General Chemicals has consolidated position of Tata Chemicals (TCL) in the global soda ash market. Post-acquisition, TCL has become the second largest soda ash manufacturer in the world with majority of the production coming from cheaper natural sources. This goes well with its overall global strategy. TCL is already on an expansion spree for its inorganic chemicals and fertilisers plants in India. This will help it to strengthen its domestic presence. TCL is setting up a 30,000-litres-per-day ethanol plant and has ventured into wholesaling of fresh agricultural produce. This diversification would help in mitigating risk from slowdown in the core business.

Challenges: TCL has to see through an effective integration strategy of its soda ash business with the overseas acquisition. Managing overall growth of the company will be a tough task given the diversification into new business domains.

VOLTAS

Competencies & Opportunities: Voltas is a market leader in central air-conditioning and climate control business in India, besides being a major player in booming West Asia. It is also India's leading distributor and re-seller of textile and mining equipment. Recently it went through a corporate restructuring which has transformed it into a leaner and competitive player. The demand for central A/Cs and climate control systems is booming, thanks to rapid growth in retail, real estate and hospitality sectors. It has also got a boost from strong capex in textile, mining and retail sectors where it supplies forklifts.

Challenges: Being a capital goods supplier, it's highly prone to an economic downturn. It faces strong competitors across its product portfolio. The consumer air-conditioner business continues to be a drag on the company's profitability.

TATA TELE (MAHA)

Competencies & Opportunities: The company is aggressively expanding its base in smaller circles. Increasing presence in high-growth telecom circles B and C will help the company grow its subscriber base rapidly from existing five million.

Challenges: Higher competition is likely to put further pressure on the company’s average revenue per user. This necessitates more focus on value-added services. The company currently provides mobile services on CDMA platform. Establishing a GSM footprint would be a challenging task given competition from bigger GSM players. The company needs to expand its operations in the field of managed services to stay competitive. The company lacks brand recognition. It has to establish its brand presence in the highly competitive
markets.

TITAN IND

Competencies & Opportunities: Titan has diversified into a wide consumer-centric product portfolio comprising time pieces, jewellery, eye wear, and precision equipment among others. A good pedigree, reputed brand standing and strong distribution and service network offer good prospects for the company to ride the boom in consumption. Expansion of retail stores, specially in tier II cities, will help the company increase profitability.

Challenges: Record high gold prices can lead to a drop in jewellery demand, restricting the company's growth in the business. International foray may not be very profitable in view of the global economic slowdown. Branded retail segment is fraught with intense competition. Dominance of unorganised players in the lower end of the watch market poses a challenge. Given rising incomes, Titan may have to face competition from international brands in the premium watch category.

TRENT

Competencies & Opportunities: After establishing its foothold in retail space through Westside stores, Trent is taking new initiatives of foraying into the premium segment. Recently, it joined forces with the Benetton Group for the expansion of the Sisley brand in India. It is tying up with designers to mark its presence in a range different from the private labels. This will help the company face stiff competition in the domestic retail space. Trent has reported good growth in the past few years. Revenues have grown consistently (CAGR of 55% from FY04-07). A sustained revenue model is necessary as it facilitates future expansion plans.

Challenges: The roll out of new stores has not been aggressive. The company has added only 19 stores from ’03 till date. Faces competition from aggressive players such as Pantaloon and new entrants including Reliance Retail.

Sunday, September 23, 2007

Car Models in India

Friday, August 3, 2007

Top Automakers driving for efficient logistics

2006 and 2007 have been eventful years for the automotive sector. It has seen a huge amount of restructuring, not only in its supply chain but also among the vehicle manufacturers themselves. DaimlerChrysler has ceased to exist with the sale of the Chrysler business to a private equity house and VW Group is now effectively controlled by Porsche. And a large proportion of the US component suppliers remain in bankruptcy protection. The implications of these changes for logistics are substantial. In the case of VW, there appear to have been organisational changes directed in part to creating new logistics systems. This is a response to the success of the KOVP logistics system at BMW, a major competitor to VW’s Audi brand.

While the automotive logistics markets is mature in the traditional markets of Japan, Western Europe and North America, it is growing vigorously in the new markets, such as China, central Europe, Russia and Turkey.

Over recent years, logistics has risen up the corporate agenda of almost all vehicle manufacturers. Most now either have programmes in place or are working on projects to develop their logistics systems. It has been realised by most VMs that logistics is fundamental not only to the efficient working of their assembly plants, but is also key to the management of their markets.

In parallel with the greater sophistication of these logistics systems is an increasing need for more sophisticated services from LSPs. This is seen particularly in finished vehicle logistics, where capabilities such as track-and-trace and greater visibility of inventory are now essential.

A large number of logistics providers compete for contracts with the vehicle manufacturers, which, in contrast, are few in number and well informed about the market.

The result is that operating margins among LSPs servicing this market are often poor, with low organic growth. LSPs, however, continue to be attracted by the large volumes offered.

Assembly plants can easily cost t500m and the vehicle manufacturer feels under intense pressure to utilise this investment to the maximum. This can be characterized as "production orientation".

Raw materials and components need to be fed into the assembly plant, coordinated with the production schedule. This has been perceived as the central logistics task in the automotive supply chain and one that in the past was given to production engineers.

The attitude to logistics changed in the 1980s with the emergence of the Toyota Production System. The greater prominence given to logistics-related ideas such as JIT has resulted in increased prominence for logistics managers and more integration between different types of logistics process in the supply chain.

Toyota has the most coherent approach to logistics, closely followed (but in a very different manner) by BMW. It is no coincidence that these two companies are among the most successful vehicle manufacturers.

Most passenger vehicles are made near the market where they will be sold. Even components are manufactured near the assembly plant. Within Europe, for example, it is quite usual for 90% of component suppliers to be located within 100km of the assembly plant. This supply chain geography is so pronounced that the car industry has created specific locations for suppliers next to its assembly plants, known as supplier parks. Components are then fed directly into the assembly plant often using conveyer belts or forklift trucks.

The use of supplier parks also improves communication between component supplier and vehicle manufacturer.

But Tier 1 suppliers are also faced with the contradictory demands of vehicle manufacturers. On the one hand they want suppliers to invest in logistics or assembly facilities near assembly plants, but are unwilling to commit themselves to suppliers for long enough to ensure that the investment is covered. Consequently there is a danger that suppliers will be left with facilities at or near the VM's assembly plant which are redundant or under-used.

Many LSPs view this as an opportunity for outsourcing, with several suppliers sharing facilities owned and run by the LSP. This appears logical, but conflicts with the unwillingness of many T1 suppliers to outsource assembly operations which they regard as core competencies.

Logistics is usually one of the core functions of such near-plant facilities. Their main function is to break-bulk, and feed components into the assembly plant in a sequence dictated by the production schedule. This would suggest that LSPs are well positioned to offer such services within shared-user facilities, certainly the case in many plants. However, many larger T1 suppliers are very aware of the importance of logistics as a core competency and are unwilling to relinquish it to LSPs on a large scale.

As a consequence, the market for such centres may appear more promising for LSPs than in reality.

Reference: International Freighting Weekly

Monday, July 30, 2007

Toyota vs. Its Competititors - A Case Study

Akio Toyoda sat on stage as Toyota Motor Corp. president Katsuaki Watanabe introduced nine other executives. When Toyoda's turn came, he made a five-second bow to shareholders gathered in Toyota City, Japan, for the June 22 annual meeting. Two hours later, at a private board meeting, he was named head of Japanese sales.

The second event signalled that Akio, 51, had stepped closer to his apparent destiny as patriarch of a carmaking dynasty that his great-grandfather Sakichi funded and his grandfather Kiichiro started in 1937 by copying General Motors Corp.'s Chevrolets.

In seven decades, the Toyodas have driven their company to global dominance. They manufacture vehicles in 27 countries and regions and sell them in more than 170. They employed 299,394 workers and brought in $195.7 billion US in sales in the fiscal year ended on March 31, almost double a decade earlier. Through holdings in 14 Toyota Group suppliers, they oversaw another 126,638 people and $119.2 billion in revenue as of March 31.

In this year's first quarter, Toyota passed GM for the first time to become the world's biggest automaker by unit sales. Toyota sold 2.35 million vehicles -- 88,000 more than GM did. Toyota held on to the lead in the first half, although GM outsold it by 38,000 vehicles in the second quarter.

A dominant Toyota faces unfamiliar challenges. For most of their automaking history, the Toyodas were underdogs struggling against Detroit's juggernaut.

When the Toyodas, who started in business by manufacturing weaving looms, built their first prototype automobile in 1935, Ford Motor Co. had been making cars for three decades.

After the Second World War, demand for vehicles in Japan was so weak the Toyodas opened dry-cleaning stores. To thwart protectionist pressures in the U.S., Toyota joined with GM and began building cars there in 1984.

The next challenge for Toyota -- and the family that runs it -- is managing size.

Quality has been dented by recalls in the U.S. and Japan. Rivals are undercutting Toyota in the U.S. The company is offering an average of $5,083 in rebates, discounted financing and other incentives on its Tundra full-size pickup truck as gasoline prices rise.

GM lost its sales crown of 76 years after it stumbled over quality and cost issues -- and similar woes threaten to bedevil Akio. "What do you do when you pass a rabbit you've been chasing for 70 years?" says John Shook, a University of Michigan management instructor and a former Toyota engineer.

"Akio has a chance to articulate the first truly new vision for Toyota since Kiichiro. If he doesn't, you'd have to expect decline to set in at some point."

For now, Toyota is enjoying undisputed supremacy. It earned 51.2 per cent, or $14.2 billion, of the $27.7 billion US in net income the world's 17 largest carmakers made in the most recent annual reporting period, says Ashvin Chotai, an analyst at Global Insight Inc.

By 2013, Toyota will build 12.4 million vehicles a year compared with GM's 10.2 million, predicts Michael Robinet, a CSM Worldwide Inc. analyst.

"Toyota has staying power," says Wendy Trevisani, who bought 1.3 million Toyota shares in the 18 months ended in June for Thornburg Investment Management.

Toyota's growth engine is straining. Its shares fell 6.2 per cent to $62.98 this year through July 23 compared with a 14 per cent increase to $34.92 at GM as of July 20. Investors worry that Toyota's expansion will boost costs and damage profits, says Christian Takushi, an analyst at Swisscanto Asset Management AG, who disagrees with that assessment.

"Toyota shares are mispriced," says Takushi, whose company held one million of them in March. "They deserve to be trading at a premium."

Akio Toyoda's appointment to head Toyota's Japanese sales unit lands him in a troublesome spot. During the first half of 2007, Japan's industrywide vehicle sales, excluding minicars, fell 10.5 per cent to 1.8 million, their lowest since 1975.

Akio will introduce new models quickly and open megadealerships, predicts Yasuhiro Matsumoto, a senior analyst at Shinsei Securities Co. That may spark consolidation and weaken Akio's support among dealers left behind, he says.

"Toyota is not the kind of simple company that will change just because Akio becomes president," Matsumoto says. "He needs charisma, and right now, because he's been very low-key, he doesn't have it."

Referenced from Bloomberg

Thursday, July 26, 2007

Rest of Asia exporting more Japanese cars

Japanese automakers are scrambling to increase exports from production bases in other Asian nations to take advantage of improved worker skills and trade deals.

Asia replaced North America as the largest overseas production base for Japanese automakers in 2006, with output reaching 4.13 million vehicles. Though these vehicles were intended to meet local demand, about 400,000 were shipped to other regions. The figure is expected to reach 600,000 in 2008, more than 10% of production.

In one example, Honda Motor Co. is boosting exports from Thailand to Australia and New Zealand by 40%, or 47,000 units.

Nissan Motor Co. this fiscal year is doubling exports of its Tiida subcompact from Thailand to Australia to roughly 10,000.

Last year, Toyota Motor Corp. exported 100,000 IMVs (Innovative International Multi-purpose Vehicles) to more than 90 countries from Thailand. It will step up exports this year and continue doing so in the future.

Suzuki Motor Corp. plans to triple output capacity to 300,000 vehicles a year at its second Indian assembly plant in 2008. Half will be shipped to Europe and the Middle East. Nissan will launch a new plant in India in 2009 and export subcompact cars to Europe from there.

At a joint venture for export models in the Chinese province of Guangdong, Honda doubled output of subcompacts to 50,000 a year this past spring. The cars are bound for 10 countries, including the U.K., Germany and France. Beginning this month, they will be shipped to Poland and the Czech Republic as well.

One reason for all these exports is the improved quality of Asian-made automobiles, thanks to technology transfers and parts suppliers setting up local operations.

Trade deals are another reason. Thailand signed a free-trade agreement with Australia in 2005, shedding a 15% tariff on passenger cars. More may be on the way. The Association of Southeast Asian Nations and India have agreed with the European Union to launch trade negotiations.

In fiscal 2006, Honda earned nearly 10% of its group operating profit in Asia and Suzuki generated about 40% of its group pretax profit in India alone.

Referenced from Nikkei Weekly

Monday, July 23, 2007

Global Auto makers' report card (H1 2007)

Referenced from The Globe and Mail

General Motors Corp.: GM is now being challenged in its long-standing position as the world's top auto maker by surging Toyota. But the company vows to regain the Number One spot by dramatically reducing its costs, slashing low-profit sales to rental companies and other fleets, and revamping its product lineup as sales of trucks and sport utility vehicles slump. It is closing plants and cutting jobs to try to become competitive with Asian-based car makers, and 2007 is expected to show some improvement on 2006, when it lost $2-billion (U.S.).

Ford Motor Co.: Ford continues to lose market share in North America, as the markets for its sport utility vehicles and pickup trucks weaken. The company lost a whopping $12.7-billion (U.S.) in 2006, and it is in the process of eliminating thousands of jobs, while closing plants in Canada, the United States and Mexico. Its goal is to return to profitability by 2009 by shifting its focus to growing segments such as crossover utility vehicles and passenger cars.

DaimlerChrysler AG: The German-American auto giant signed a deal this spring to sell off about 80 per cent of its Chrysler arm to private equity firm Cerberus Capital Management LP. Chrysler has a deep cost-cutting plan and will eliminate 13,000 jobs by the end of 2009, mostly by offering buyouts to employees. While all the North American car firms are losing ground to the Japanese, Chrysler has not been hit as hard as GM and Ford. To boost sales of its key minivans, Chrysler recently dramatically cut prices of the product line in North America.

Toyota Motor Corp.: Toyota has been reporting record sales and profits, driven by dramatic growth in North American and European markets. Earlier this year, it surpassed General Motors for global sales for the first time, taking the lead in the January-to-March quarter. Toyota has a reputation for high quality, but it has also been an innovator. It is the top player in the gas-electric hybrid market with the Prius, and the company has now sold more than a million hybrids. It is also a leader in using fuel cells, which power cars from electricity generated from hydrogen.

Honda Motor Co.: Like Toyota, Honda has made huge inroads in the North American car market with double-digit sales increases. And it is also active in emerging markets such as China and India. While Honda has done well with its gas/electric hybrids, it has also hit some speed bumps; it decided earlier this year to stop production of its slow-selling hybrid Accord, which was designed for extra power rather than fuel efficiency.

Nissan Motor Co.: The Japanese auto maker saw sales decline in 2006 in its two largest markets, Japan and the United States, although the numbers have picked up sharply in North America in the past few months. Nissan has also put in place a series of cost-saving measures to try to boost profitability. It is behind Toyota and Honda in developing the hybrid market, but is putting on a big push to catch up in green technologies.

Volkswagen AG: The German company is the biggest European car maker, posting strong results in Europe and Asia, but has been less successful in North America where it has lost money for the past several years. Volkswagen has been cutting thousands of jobs to improve its competitive position, but it owns a range of strong international brands including Audi, Bentley and Skoda.

BMW AG: The German-based luxury car maker saw a dip in profits in its most recent quarter, after spending bags of money launching new models. But it predicts a turnaround in the balance of the year, and record profits for 2007. BMW is planning to boost production at its plant in the United States – its biggest market – to insulate it from exchange-rate fluctuations. The company has also turned the Mini brand into a big success by targeting aging boomers, and it also owns Rolls-Royce.

How Toyota develops exceptional people

Excerpts sourced from Rediff.com

Leading Toyota authorities Jeffrey Liker and David Meier give you the keps to growing top performers from within through a detailed preocess of preparation, traning, and follow-up. Here are Toyota's secrets to building an exceptional workforce . . .

No one seems to be sure of the exact course of events that led to the development of the Toyota Production System (TPD) as it is today, but we are sure that without highly capable people the current system would quickly disintegrate. We know that in the early development of TPD, its chief architect, Taiichi Ohno, wanted to press forward with some of this ideas and discovered that people were not ready.

When he went to work to achieve single-piece flow in a machine shop and he needed multiskilled workers, he encountered resistance and learned that he had to be patient and to think about developing people who would be able to support the methods. He could not simply order people to flow the rules (although he was known as being very forceful when necessary).

He needed people with thinking capability because of the challenges resented by the application of his new ideas. In fact, the real purpose of creating flow was to bring problems to the surface, which would force people to think about solving the problems and to help them to develop their abilities. A select few front-office experts could not possibly deal with all the situations that would surely arise as Ono pressurized the system, thereby forcing failures. He needed capable masses.

The development of capable masses requires a clear plan. It requires time and patience. Above all its takes persistence and the willingness to stick with it and to deal with the individual peculiarities and challenges of each person.

When Taiichi Ohno discovered the importance of highly capable people, he sought a method of teaching that would support his needs. He believed he had found such a tool in the Job Instruction (JI) Method taught by the American occupation forces after World War II.

It has been the primary teaching tool for all of Toyota since 1950s. Today the capabilities of Toyota employees are a hallmark of the company. We often talk to managers of other companies who view the capability of Toyota employees to be some sort of anomaly or option that is open only to Toyota.

The truth is that Toyota does like to start with good people who posses the capability to become exceptional employees. The people whom Toyota selects must have the capacity and desire to learn. Those are the only absolutes. In fact if one were to look closely at Toyota employees, one would find a broad spectrum of humanity similar to that in any other company -- with all the beauty and blemishes found anywhere.

Toyota employees bring to bear issues similar to those of other companies, such as attendance problems, resistance to change, lack of motivation, and even reluctance to accept the philosophy of TPS.

What allows Toyota to be successful in spite of these challenges is the efforts and interest in drawing out the best of the employee's abilities and initiating possible solutions (rather than a shrug and the 'What are you going to do?' attitude we hear from other companies). Perhaps Toyota has recognized the reality of human behavior and limitations, and it has created systems that minimize those limitations or take advantage of human desire.

People are carefully selected to join Toyota based on their potential and a judgment that there is a fit with the job and with Toyota's culture. They must have some general problem-solving capability and be willing to work as part of a team.

People develop specific capabilities after they are hired at Toyota. It is Toyota's expectation that it will mold the individual to fit the needs of the organization as well as support the interests of the individual. It is this mutuality of purpose that leads to more satisfied employees who are able to perform in exceptional ways.

One must not assume that Toyota is completely altruistic in its efforts to develop employees and to provide engaging activities. The objective is to provide benefits for the employees, which in turn also returns benefits to the company.

Toyota often creates situations in which there is an equal balance between reward and punishment in order to encourage the desired behavior. For example, given the critical nature of attendance on the performance of the system, a high emphasis is placed on having great attendance (perfect attendance is preferred).

On the reward side, Toyota Motor Manufacturing Kentucky (TMMK) has an annual award ceremony for all employees who achieved perfect attendance in the previous year (over 60 percent in 2005). The award ceremony includes entertainment from some top acts in the country including jay Leno, Bill Cosby, and Brooks and Dunn. In addition, each person has his or her name placed into a hat, and 14 winners are drawn, each receiving a brand new car (a mix of Camrys and Avalonds). To sweeten the pot, each team member with consecutive years of perfect attendance will have his or her name added to the hat an additional time for each year of consecutive perfect attendance.

In 2006 there were more than 400 employees who had achieved 15 consecutive years of perfect attendance (the length of the program)!

On the punishment side, repeated unexcused absences are one of the easiest ways to lose a job at TMMK. The policy is fairly strict and is weighted heavily on attendance history and also the circumstances. Consideration is given for good reasons, but repeated absences for poor reasons are sure to lead to discipline. A flat tire is not considered a 'good' reason, for example, but the effort a team member makes to reduce the time loss is in his or her favor.

If a team member has a flat tire and misses the entire day, it is not viewed favorably. And apart from the fear of being fired, sitting home while all your team associates are at the big bas hoping to win a car is its own punishment.

Wednesday, June 27, 2007

Relationship between Tatas and DaimlerChrysler

DaimlerChrysler India owns a 6.6% stake in Tata Motors and the two companies have a history of forming alliances in India.

In 1994, when DCX began its manufacturing venture for Mercedes-Benz cars in India, the two companies began a 51/49 joint venture (JV), which was then known as Telco. DCX gradually increased its holding and in 2001 it bought out the entire equity held by Tata Motors. This wholly-owned unit, however, still holds the aforementioned stake in Tata Motors.

Recently Tata Motors gave the go-ahead to Mercedes-Benz's plan to manufacture commercial vehicles in India by issuing a ”no objection certificate” for the venture. According to the Economic Times, Indian government regulations required that Tata signed the certificate before Mercedes-Benz was given the go-ahead for its Indian manufacturing plans. Mercedes-Benz's parent group, DaimlerChrysler (DCX), currently imports a relatively small number of Mercedes-Benz trucks. However, this means that the vehicles in question are subject to import tariffs, and Mercedes-Benz wants to begin production at its passenger car production facility at Pune before moving assembly to a purpose-built truck facility at Chakan, near Pune.

Source: Economic Times

CII supporting companies that are going global

The Indian companies are going global and many of them have achieved multinational status. To facilitate this process, the Confederation of Indian Industry (CII) in partnership with major Indian companies has launched an initiative -India Inc Going Global.

It is an attempt to create a platform for established and emerging Indian companies, banks, management consultants, and law firms to come together and share insights, which can be leveraged while setting up offices overseas and acquiring overseas companies.

Chairman CII Indian MNCs Committee & Chairman GVK Biosciences said "The aim is to create an ecosystem which can accelerate the creation of multinational corporations from India. The initiative aims to provide a forum for learning sharing and addressing common challenges of the globalisation journey in an actionable format."

The initiative is being led by Asian Paints, Bharat Forge, ICICI Bank, Infosys Technologies, Mahindra & Mahindra, McKinsey & Company and Prof. Tarun Khanna, Jorge Paulo Lemann Professor of the Harvard Business School.

The initiative is organised into operational entities termed as `clusters'. These clusters are based on functional areas or common challenges and opportunities. The three operational clusters are Leadership Development & Talent Management, India Advantage and Inorganic Growth.

Deputy Managing Director ICICI Bank Ltd said the global merger and acquisition business is $4 trillion and Indian companies have only tapped one per cent of the market. Therefore the initiative will help reach this market.

Source: Hindu

Thursday, June 14, 2007

Human Capital Trends in Indian Automotive Sector

The success of Indian enterprise has encouraged foreign companies to also set up their base in India. Thanks to many Korean, Japanese, European and US auto firms for investing in India and for linking their prosperity to India’s future. All these firms, Indian and foreign, are contributing to making India an automotive and industrial powerhouse, making us a global manufacturing hub.

Amidst this phenomenal growth, there are numerous trends and developments being experienced across the human capital / resources function within the Indian automotive sector. Discussed below are excerpts of some of the available articles and editorials on this topic.

Trend 1: Reverse brain drain for Auto R&D

According to Booz Allen Hamilton, R&D spending in India has grown by 17% in 2006 whereas, comparative figures in US and Europe is only 5.2% and 2.3% respectively. With globalization, Indian corporate segment experience more and more challenges in market competitiveness and product innovation. Indian strategists are focusing on making their R&D investments judicially to get higher research output in lesser costs. Corporate India seems to have realized that product innovation is the key to survival and may serve the best competitive strategy for sustenance.

According to the Society of Indian Automobile Manufacturers, there are already over 250 Indian expatriates who have returned to work on R&D in domestic automobile companies Mahindra & Mahindra, Ashok Leyland, Tata Motors and Hindustan Motors. SIAM predicts that their numbers will double in two years.

With investments of over Rs 100,000 crore lined up in the Indian automobile industry, and European and US car majors making an aggressive push into India, Indian car companies have begun to understand the significance of R&D. Investments are small -- R&D budgets are just 1 to 2 per cent of domestic car makers' turnover -- but are expected to grow rapidly. "The return of expatriates is helping the Indian companies to overcome their human resource challenge in the field of research. The significant development of the automotive industry is now a magnetic proposition for qualified people to return and harness their knowledge," said Dilip Chenoy, director general, SIAM.

SIAM has set up a society in the US known as the Association of Scientists of Indian Origin that taps Indians working in the automobile majors there and provides access to domestic firms to identify and recruit talent in engineering and R&D. There are numerous examples.
# Arvind S Bharatwaj, for instance, took a 50 per cent cut in his salary in General Motors in the US to return to India and now heads the advanced engineering unit of Chennai-based Ashok Leyland. He has been blending the use of electronics and engineering (infotronics) in commercial vehicles to come out with new high-tech products for the company.
# Pawan Goenka, also returned after a 14-year stint with General Motors' global research and development centre in Detroit. He now heads the automotive division in Mahindra and has been the force behind the introduction of Scorpio, the most successful SUV ever launched in India. He has also prepared the blueprint to sell the Indian SUV in the US.
# V Sumantran, who was closely associated with GM's futuristic EV1 electric cars project and then played a key role in Tata Motors' small car before he quit, now advises Ashok Leyland on developing battery-operated hybrid trucks and buses.
# Raja Pant left the design development facility of Ford Motor Company in the US and is now with the body fabrication business of Tata Motors.
# Sudhir Rao, who was with General Motors engine development operations in Detroit, now works with Avtec Engines, a unit of Hindustan Motors, which supplies engines to Mitsubishi Motors and General Motors India.

Source: Business World

MY SAY
=> Although there are only few examples, more and more Indian R&D executives will come back to India.
=> As several Auto biggies have already started setting up their R&D centers in various locations of India, availability of these brains will consolidate & position India as the next R&D hub.
=> Cars in the near future will have a touch of Indian-ness in their designs.
=> After BPOs and KPOs in ITES Sector, manufacturing sector and more specifically its R&D function is going be the next BIG THING in India.

Trend 2: Auto sector in south Indian state to create 500,000 jobs

The automobile industry in Tamil Nadu in south India will be able to generate as many as 500,000 fresh jobs in the next 10 years and emerge as a 20 billion U.S. dollars industry, a study by an Indian industry chamber said Monday. The study by the Confederation of Indian Industry (CII) titled "Mapping of Human Resource Skills in Tamil Nadu - 2015" said by 2015, the auto sector will employ 580,000 people.

The southern Indian state is already home to major auto companies such as Ford, Hyundai, Ashok Leyland and components firms that employ about 80,000 people. Tamil Nadu has 30 percent share of the auto components market and 17-20 percent share of the vehicle industry in India, the CII study says, adding the sector has the potential for a six-to-seven fold increase in output.

It estimates the size of the industry in Tamil Nadu will be 15 billion U.S. dollars to 20 billion U.S. dollars by 2015. The study observes that the recent trends in the auto industry include the adoption of lean manufacturing practices, quality, shift from assemblers to contract manufacturers and techno- commercial purchases. "In product development, the auto industry needs project management and problem solving skills to identify root causes for design issues," the study says.

Source: CII

MY SAY
=> Tamil Nadu would become the Detroit of India
=> Most of the manufacturing and R&D units from Auto sector would be concentrated in this region.
=> Besides, Tamil Nadu, Maharastra is also seeing such investments and could emerge as the next preferred destination for Auto sector.

Trend 3: Stats on Market Size and HR Challenges in Indian Automobile Sector

# Growth Trend
o Auto sector could grow to $145 b by 2016
o The domestic automobile market has been growing at 14.2 per cent CAGR over the past 4 years (2000-01 to 2004-05), While the auto components market has been growing at 19.2 per cent CAGR (2000-01 to 2003-04).
o The automotive sector also offers significant employment opportunities. It employs 0.45 million people directly and around 10 million people indirectly

# HR Challenges
o Insufficient skills in certain areas, including interpersonal communication, computer literacy, and product knowledge
o Insufficient training
o Insufficient numbers of high-performance customer-facing personnel
o Difficulty securing the best talent to sales and management positions
o A low awareness of career opportunities and paths within the industry, and
o A nagging image problem for the industry exacerbating these issues
o Rajeev Dubey, president of HR and corporate services for Mahindra & Mahindra Ltd., one of the 10 largest Indian business conglomerates, says that with the exception of the relatively few managers with multinational experience, India’s homegrown managers are poorly prepared to cope with global challenges arising from mergers and acquisitions, joint ventures, and entering new markets.
o Of 50 companies in the automotive supply sector, Gaurav Lahiri, operations manager at the Hay Group India in Gurgaon, estimates that only three or four are trying out cutting-edge HR practices. “It’s a case of overpromise and no deliver,” he says. “From an intellectual standpoint everyone nods their head and says strategic HR is great. Whether leaders are engaging and motivating people on the ground is a question. We seldom come across a CEO client that loves the HR managers: They’re constantly complaining about how the HR guys are clueless on the business practices.”

MY SAY
=> I strongly feel that there is very low focus on R&D in Indian companies and thats the reason why India still lacks the ability to compete on designs and technology aspects.
=> Although we have proved to the world that we can produce the best brains yet our managers lack the experience to handle global challenges arising from M&As, JVs and globalization. However, due to the increasing investment from global auto companies in India more and more best practices would be siphoned to India that will gradually give the required exposure to Indian executives. Although it would take some time but I strongly feel that in the next 10-15 years we will see some dynamic leaders in the likes of Carlos Ghosn and Katsuaki Watanabe...

Trend 4: India the latest stop for young executives

# India has become more attractive to executives seeking a chance to test their mettle in a growing market. Some 300 new foreign executives are forecast to come to India this year, according to Kris Lakshmikanth of The Head Hunters.

# According to Evalueserve, India will need more than 100,000 expatriates by 2010. In 2002, the government reported that 13,000 expats were working in the country. Yet the need goes beyond language skills to the highest levels of management. "In India, most business is at the start-up stage, so we need managerial talent," says Sudhakar Balakrishnan, director of Adecco Consulting in Bangalore.

# Indians themselves have filled some of this shortfall, as more are staying here rather than venturing abroad - reversing decades of brain-drain. The need for foreigners remains, however, whether it is for foreign companies establishing their presence in India or for Indian companies wanting experienced Western executives.

MY SAY
=> It would eventually lead to more interaction and exposure for Indian executives.
=> Indirectly this will help in the transition of best practices to Indian corporate world.
=> More and more new executives or rather leaders will emerge from India gradually.

Trend 5: Interesting development in Mahindra & Mahindra – Search process for HR

CEOs in India went outside the HR pipeline to find executives with business acumen who could add a strategic HR perspective. For example, when the leadership team at Mahindra & Mahindra wanted strong HR leadership, they hired Yale University-educated Dubey as president of HR and corporate services. In a career path not usually seen in the United States, Dubey previously had been a CEO for two companies in the Tata Group, India’s largest private conglomerate.

“I had never been part of the HR function, but I dealt with a lot of HR issues when I was a CEO,” Dubey says. Now, he leads 150 HR professionals at Mahindra & Mahindra. “We do a lot of work that’s strategic to the success of our businesses: talent management, creating synergy, creating a culture of integration, mapping, succession planning and developing a global mind-set.”

MY SAY
=> I always feel that HRs in India lack the knowledge on actual business of their company. They are always focussed on the functions, operations and designations and totally ignore the actual requirement of competencies. This leads to the hiring of candidates who eventually prove that they were wrong hires in most of the cases.
=> This practice of picking up a candidate who was earlier a CEO is a very logical and intelligent move of M&A.
=> This offers a very logical approach of hiring i.e. depending on the main corporate strategy of the company, people in the HR function should be chosen from relevant background. This will insure that HR executives will have a clear and complete understanding of not only the human capital requirements but also the competencies required to execute corporate vision.

Trend 6: Indian tech drives autoworld

From infra-red vision in headlamps to in-car Bluetooth applications, Big Auto is turning to India for top-of-the-line technology.

Auto MNCs have been wiring back-office functions to India including supply chain management and procurement functions for their global operations. What’s new is the tech edge in the latest round of sourcing. A host of OEMs due for an India debut are looking at both component and IT sourcing as part of their regional strategy. And car makers like General Motors, Nissan, DaimlerChrysler, BMW and Ford already outsource a host of back-office functions for their global requirements.

Wipro Technologies, Satyam Computer Systems, Genpact are some of the vendors involved in auto outsourcing. Says NS Bala, senior vice-president for manufacturing solutions, Wipro Technologies, “Auto companies are focussing on managing their brands. Applications like Bluetooth in car, remote diagnostics services and new systems that seek to improve safety on roads are being outsourced to India.” Wipro Technologies has eight automobile clients and a 1,000-people team developing applications for global car majors.

Genpact’s BPO has around 1,000 people engaged in finance, accounts payable, analytics, supply chain management and procurement tasks for global auto makers.

Source: Economic Times

MY SAY
=> Its too early to pin our hopes and start projecting on this market in India due to the presence of some of the best technology companies worldwide. It would be really a tough competition for all these companies to earn a share in this market.
=> As India has an edge due to cost effectiveness and availibility of talented yet cheap labour. I foresee these companies to handle all those aspects which would be backend tools or can be outsourced.

Tuesday, June 5, 2007

Top 25 Supply Chain Models

AMR Research released its annual Supply Chain Top 25 report. The report identifies the top 25 manufacturers and retailers that exhibit superior supply chain capabilities and performance. The companies in this report demonstrate excellence across basic metrics related to execution - return on assets, revenue growth, and inventory turns - and are recognized by their peers and AMR Research as supply chain leaders. In this year's list, Nokia, Apple and P&G are at the top three of the list. Others in the list of top 25 include Motorola (12), Johnson & Johnson (14), Nike (18), GSK (20) and HP (21). AMR Research analysis also shows that supply chain leadership translates into stronger market performance. Consistently, the Supply Chain Top 25 as a whole has outperformed the Dow Jones Industrial Average, the S&P 500, and the NASDAQ.

Following is the list of Top 25 Companies with Best Supply Chain Models:

To read the entire article, please visit:
http://www.amrresearch.com/Content/View.asp?pmillid=20450

Monday, May 14, 2007

Reverse brain drain for Auto R&D

Excerpts sourced from Business World

According to the Society of Indian Automobile Manufacturers, there are already over 250 Indian expatriates who have returned to work on R&D in domestic automobile companies Mahindra & Mahindra, Ashok Leyland, Tata Motors and Hindustan Motors. SIAM predicts that their numbers will double in two years.

With investments of over Rs 100,000 crore lined up in the Indian automobile industry, and European and US car majors making an aggressive push into India, Indian car companies have begun to understand the significance of R&D. Investments are small -- R&D budgets are just 1 to 2 per cent of domestic car makers' turnover -- but are expected to grow rapidly. "The return of expatriates is helping the Indian companies to overcome their human resource challenge in the field of research. The significant development of the automotive industry is now a magnetic proposition for qualified people to return and harness their knowledge," said Dilip Chenoy, director general, SIAM.

SIAM has set up a society in the US known as the Association of Scientists of Indian Origin that taps Indians working in the automobile majors there and provides access to domestic firms to identify and recruit talent in engineering and R&D. There are numerous examples.
=> Arvind S Bharatwaj, for instance, took a 50 per cent cut in his salary in General Motors in the US to return to India and now heads the advanced engineering unit of Chennai-based Ashok Leyland. He has been blending the use of electronics and engineering (infotronics) in commercial vehicles to come out with new high-tech products for the company.
=> Pawan Goenka, also returned after a 14-year stint with General Motors' global research and development centre in Detroit. He now heads the automotive division in Mahindra and has been the force behind the introduction of Scorpio, the most successful SUV ever launched in India. He has also prepared the blueprint to sell the Indian SUV in the US.
=> V Sumantran, who was closely associated with GM's futuristic EV1 electric cars project and then played a key role in Tata Motors' small car before he quit, now advises Ashok Leyland on developing battery-operated hybrid trucks and buses.
=> Raja Pant left the design development facility of Ford Motor Company in the US and is now with the body fabrication business of Tata Motors.
=> Sudhir Rao, who was with General Motors engine development operations in Detroit, now works with Avtec Engines, a unit of Hindustan Motors, which supplies engines to Mitsubishi Motors and General Motors India.

Transformation of Tata Motors

A very interesting interview was published by McKinsey Quarterly in form of case study on transformation of Tata Motors that represents one of India's most remarkable corporate-turnaround stories in recent times.

"...Drastic measures were needed to cut costs following record losses in 2001, but the subsequent change program has also involved a new strategic orientation emphasizing less cyclical products and a determined push into overseas markets."

In this McKinsey interview, the managing director of Tata Motors, Ravi Kant, describes the stages of the transformation and explains how cutting through management layers helped overcome resistance and unleash new ideas.

Thursday, April 26, 2007

Human Capital Trends in Global Automotive Industry

In order to understand some of the major human capital issues, challenges and trends prevailing in Global Automotive Sector, I conducted a comprehensive research on the web and found some interesting findings by renowned firms like Spencer Stuart, McKinsey Global Institute, Watson Wyatt and Egon Zehnder International.

Listed below are excerpts of some of these findings:

Study 1: Changing Face of Leadership: Insights from Auto Industry (Spencer Stuart)

Required Leadership Skills
=> Alliance and partner management experience: Alliance and partner management is rated as the most important functional experience for general management to possess, the highest of all the experience categories. Automakers increasingly are relying on strategic alliances and partnerships and in order to ensure that their organisations strike beneficial alliances and partnerships, automotive leaders must be highly knowledgeable about the industry and its complex networks, understand the forces that are driving industry change and have a strategic mindset.
=> Operations experience and results orientation: Roles in operations, manufacturing and quality assurance provide exposure to a broad cross-section of the company and the opportunity to lead large and diverse teams. These roles also are great training grounds for future senior leaders as CEOs are spending more of their time on operational issues, particularly as many of the prime targets for cost reduction are in the operations side of the business.
=> Strategic orientation and innovation leadership: Automotive companies must continually reinvent themselves to take advantage of new market opportunities and maintain long-term profitability. The CEO needs to be able to recognise those opportunities and drive innovation in the company. Automotive leaders must have a passion for challenges, seek innovative ideas within the organisation and externally, and be willing to make bold moves. Automotive leaders also must possess the skills of an entrepreneur. They should be able to identify solutions for issues related to organising processes, pull together the right team, create value and ensure that everyone in the company strives toward excellence and reliability.
=> Finance and capital allocation experience: The challenges of streamlining costs while maintaining R&D investment require that automotive executives be financially astute. They must lead efforts to vary costs, be thoughtful about capital spending and free up resources that do not provide competitive advantage. 12% of survey participants ranked finance and capital allocation as the most important functional experience for senior general management during the next 5 years.
=> International experience and a global perspective: Automotive leaders must have a truly global perspective and be culturally and intellectually flexible. More than one-third of survey respondents cited global perspective as a critical competency for automotive leaders. This includes being sensitive to cultural differences and having a keen ability to identify and leverage international opportunities.
=> Team-leading skills, people development experience: Another recurring theme that emerged from this survey is the importance of strong team-building and effective people development skills. These include exceptional communication and interpersonal capabilities, internal networking skills, people management and team leadership experience, and the ability to choose the right team and get the maximum from it.

Where are the leaders of tomorrow?
=> Just 15% of the executives we surveyed indicated that “attracting top talent” was one of their company’s top-three strategic priorities. When they do hire external candidates, the majority, 55%, said their organisations recruit within the automotive industry.
=> Top talent from other industries can help by injecting new and creative ideas that can break the traditionally insular industry out of old patterns; improve the talent pool; and supply specialised knowledge in areas such as supply chain management, marketing, turnarounds, change management and electronics.

Succession Planning
=> Most companies are doing some succession planning and talent development, but the commitment to and quality of these programs vary. More than half of the respondents said their company does an average job of succession planning and talent development, while 17% felt that their organisation’s talent development and succession planning programs meet or exceed best-in-class standards.

Quotations from Industry Leaders
“As automotive companies are likely to build alliances with companies anywhere in the world, executives must be sensitive to the cultural differences that can foster mistrust. Especially in Asia, you have to be authentic and credible and keep your promises. You have to try to achieve win-win situations as often as you can. In each culture, you must learn the symbolism that builds trust.”
- Dr. Juergen Behrend, Chairman, Hella KG Hueck & Co.

“Not only are most of the cost-reduction issues facing automotive companies driven by operating issues, but working in operations also is the place where one learns the most about leadership, given the large numbers of people involved and the closeness of the contact with people who are working on day-to-day issues and who are fundamentally running the company.” -- Rodney O’Neal, President & COO, Delphi Corporation.

“Automotive certainly companies need a CEO with vision, capable of anticipating the business cycles and managing through continuous reorganisation. The CEO needs to be one who squeezes the cost structures, constantly challenges the internal structures to find better ways, keeps the pressure high and stimulates the organisation to move — even physically.” -- Emanuele Bosio, CEO of Sogefi

“International knowledge and sensitivity can be cultivated even while without living abroad. It doesn’t matter if one has actually been a resident for years in a country or not; you may stay two to three years in a different country without developing a real global vision, because today we need to interface with many cultures and several different countries.” -- Daniele Pecchini, CEO of Comau (Fiat Group’s subsidiary)

“People management and team leadership are first and foremost, and then business acumen, of course. But, more and more important is the capability to understand cultural differences. The world is our market today.” -- Bernhard Mattes, CEO of Ford Germany

“Credibility and influencing skills also are essential when dealing with external audiences. The most effective leaders are those with balanced egos who are able to talk about their failures as well as their successes. They are able to talk to the investment community with candor, blending details about what they do right with areas in which they need to improve.” -- David Rayburn, President & CEO, Modine Manufacturing

Study 2: The Emerging Global Labor Market: The Demand for Offshore Talent in Automotive Services (McKinsey Global Institute)

Auto Job/Labor Market
=> In 2003 the auto sector employed approximately 3.1 million people worldwide. In 2008, this number is projected to be around 3.4 million employees, which represents a CAGR of 2.1 percent. Two-thirds of this employment is in the manufacturing and assembly of vehicles. When considering all employment in the auto sector, the theoretical maximum for globally resourced labor is 11 percent, which translates to 371,000 jobs in 2008.
=> The Original Equipment Manufacturer (OEM) automotive sector shows extremely limited adoption of globally resourced labor in the services elements of the sector. Currently, only around 1,200 service jobs (or around six in every 10,000 developed world workers) are offshored; by 2008, that number is projected to grow to around 4,500 (or around 20 in every 10,000 developed world employees).
=> A key trend among OEMs in the sector is to integrate teams of professionals across functions. This trend is a result of the perceived effectiveness of face-to-face real-time problem solving. Although small functional groups (e.g., R&D teams working on specific engine components) can theoretically be carved out and moved to remote locations, it is a process that would have to overcome significant concerns over quality (either real or perceived), cost (as small groups necessarily lack economies of scale), and the risk of component or vehicle designs being stolen by local producers.

Consolidation
=> The consolidation of the biggest automakers has resulted in a reduction of employment in key OEMs in the sector over the past five years. DaimlerChrysler, for example, moved from 416,501 employees in 2001 to 362,063 in 2003; General Motors shed 36,000 jobs in the same period. Going forward, some further (though more limited) head count reduction is anticipated as carmakers extract any remaining synergies from recent consolidation activity.

Study 3: Human resource issues for globalising automotive suppliers (Watson Wyatt)

The increasing globalisation of automotive suppliers poses challenges for their human resource management. To understand these challenges, the Michigan Transportation Research Institute teamed with Watson Wyatt in a study of fourteen large, international suppliers.

Summary: Suppliers are building many off-shore facilities in developing nations, particularly in Asia and Eastern Europe. Identifying the right mix of local personnel and expatriates in staffing these sites has been a tremendous challenge for these organisations. Suppliers' HR departments assist with recruitment, retention, and deployment (RRD) and the long-term workforce planning needs, but too often have only a subordinate role in that process.

=> Estimating human capital needs: Part of estimating human capital needs is determining costs of various categories of local employees in off-shore locations. Data on such costs are becoming more available, so HR departments can make approximate projections of labor costs. These costs can change rapidly, however.
Lesson: Globalisation exposes automotive suppliers to more competitors. Bidding among them for local employees drives up compensation considerably. Some decentralisation of human resources decision-making, even in suppliers that are otherwise centralised, is key to successful workforce planning for estimates of local worker availability and skill, and estimates of necessary compensation.

=> Sources of local managers: Recruiting successful local managers is difficult as well as the sources of such local managers are thin. Generally in a number of large suppliers, responsibility for recruiting local managers now rests with global human resources offices. But these firms may still recruit production workers at the local level for off-shore plants.
Lesson: Coordinate global and local HR offices, so that local production workers who aspire to management are known, and so that the company can build career paths for ambitious local employees.

=> Company growth and employee retention: The firms we studied are all growing, in considerable part through mergers and acquisitions. From an HR perspective, issues related with M&As, especially when the headquarters of the firm and the acquired company are culturally dissimilar. In addition, employees of the company being acquired, fearing layoffs, may resign.
Lesson: In making off-shore acquisitions, prepare for the possibility that the most able local employees may be the ones most open to competitor and customer job offers.

=> Importance of expatriate assignments: Survey respondents stressed the importance of good deployment of managers to satellite operations. Off-shore experience is critical in developing excellent leaders. This is especially beneficial to certain functions.
Lesson: Expatriate assignments are valuable in helping to solve the problem of executive succession.

Study 4: Globalization: foreign postings on the increase (Egon Zehnder International – GAI)

Companies are sending more managers abroad than ever, but minimising their costs, reports The Economist. According to a recent survey by Mercer, the number of international transfers from headquarters has increased at 38% of firms over the past 2 years. Yet expats, now often referred to as international “assignees” or “secondees,” are getting fewer allowances than in the past, notes the magazine. To cut costs, many firms are only expatriating employees without families. Others are offering expats “commuter” assignments that involve working abroad during the week, especially in Europe. As a result expats now tend to be under 30 or over the age of 50, with women accounting for 13 percent, up from 8 percent 5 years ago.

In a reversal of the foreign posting trend, managers from developing countries are increasingly being sent to developed countries for a spell at head office before being promoted. Having locals in top jobs can be a major competitive advantage in some countries. Yet finding local employees to replace expats is often tough and the latter are sometimes unwilling to train their successors, warns the magazine. In a sign of the times, more managers are being posted abroad without the guarantee of a job to come home to. Yet despite harsher conditions and fewer perks, foreign postings remain an attractive path to career advancement, the magazine concludes.

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